The current heat wave conditions in North, West, and Central India has taken the trade volumes on the Indian Energy Exchange to an all- time high.

The current heat wave conditions in North, West, and Central India has taken the trade volumes on the Indian Energy Exchange to an all- time high.

Vikas Srivastava & Anupam Chatterjee

The current heat wave conditions in North, West, and Central India has taken the trade volumes on the Indian Energy Exchange to an all- time high as discoms across states are resorting to the spot market to meet shortfalls, a senior exchange official told FE. The total volumes traded on the IEX has increased to 147 million units (MU) per day in the last five days as against an average of 120 MU per day earlier, Rajesh Kumar Mediratta, director Business Development at IEX told FE on Friday. “This time summer like conditions have come at least 15 days early. Last year we saw similar conditions in April. The average traded price has also increased to `3 per kwh compared with `2.20 to `2.40 in January-February,” Mediratta said.

States like Gujarat and West Bengal are buying in large quantities of spot-market power, both to support shortages due to heat wave conditions and also to meet the shortfall due to shutdown of plants. Gujarat and West Bengal are at present buying around 1000 MW each from the exchange, while Maharashtra, and Southern States of Telangana, Karnataka and Tamil Nadu are buying between 100-200 MW of electricity.

Erratic temperature transition might also explain the sudden surge in exchange prices. The sudden change in temperatures has led to abrupt surge in electricity consumption. Temperature during the last week of March was 4-6 degrees above normal, constituting heat wave conditions in many areas of the country. The rise in consumption from government policies has also brought a lot of people into the electricity grid, leading to surge in power demand especially in the summer.

Sambitosh Mohapatra, partner, energy and utilities at PwC told FE that the state discoms reaping the benefits of the Ujwal Discom Assurance Yojana (Uday) scheme are partly responsible for the increase in spot electricity trading from the energy exchanges. Discoms across the participating states have saved `11,989 crore in interest costs till December 2016 after joining the scheme. Better liquidity has improved their ability to procure power.

Off late, state discoms were signing long term power purchase agreements (PPAs) at a much lower rate. The power generators without any PPAs from the states would gain from the surge in spot market prices. That would indirectly benefit the banks and the financial institutions who funded these projects, as surge in spot market trade might help some power plants become operating assets from NPAs.

Some analysts believe that thermal capacity of around 8,100 MW in North India was lying idle due to feasibility factor. These may come on-stream as demand for power surges in the coming months. “This would keep the increase in price on IEX under check,” said analysts. This is the first summer when the Indian power infrastructure is witnessing the combined effect of all these phenomena. The power ministry on Friday took a review of power supply position, and preparedness of various power utilities during the forthcoming summer. It noted that peak demand during the summer is expected to be of the order of 165 GW.

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“We see atleast 10% increase in solar power generation during the year if the trend continues in April,” said Gangadhar Rao, an independent solar power consultant based out of Bengaluru. However, Mytrah Energy, a developer of solar and wind energy plants, has a different outlook. The company noted that solar generation tends to be a little lower in summer as the heat affects the performance of the modules.